CAB researchers eyes effects of water cutbacks

Center for Agricultural Business
- Winter 1995 "Update" Newsletter Article -
CAB researchers eyes effects of water cutbacks

From CATI Publication #950101
Copyright © 1995. All rights reserved.

Reduced water allocations from state and federal irrigation agencies could well become the standard for the San Joaquin Valley's West Side farm producers for the next decade.

Dry weather conditions in central California, combined with federal EPA regulations restricting water flows from the San Joaquin Delta, have resulted in surface water deliveries of as little as 25 percent of "contractual" amounts to the Westlands Water District and other south state irrigation agencies during recent years.

And federal Central Valley Project officials have warned Westlands to expect delivery of only 50 percent of contractual amounts through the year 2000.

Based on those figures, Fresno County could loose up to $500 million or more in gross agricultural income during the next five years, according to projections by agribusiness specialists at California State University, Fresno.

Water cutbacks force growers to either reduce planted acreage or change to less profitable crops. Westlands attributed cutbacks in 1992, for example, to 42,000 acres being idled, with a resulting gross income loss of $62 million.

And gross income losses affect more than just the agricultural sector. Professor James Cothern, a researcher for CSU, Fresno's Department of Agricultural Economics, has used computer software technology from the U.S. Department of Commerce to pinpoint sectors of the economy that will be hurt most by the multiplying effect of farm income losses.

In his "input-output" analysis of the effects of water cutbacks, Cothern projects scenarios with reductions ranging from 25 to 50 percent, with options allowing for partial or no augmentation from groundwater or other sources.

Under the various scenarios, agricultural employment losses range from nearly 1,300 to more than 3,100 positions per year. Other county employment sectors also would be affected. For example, the resulting loss of spending power of those employed in agriculture would reduce the demand for health care services, resulting in loss of from 103 to 189 positions. Job losses in the retail sector would range from 180 to 400. Restaurant sector positions would be cut by anywhere from 94 to 208.

The wholesale, transportation, miscellaneous and business services and the financial industries also would suffer. In the most severe situation transportation services would have demand reduced by up to 145 jobs. Another 244 jobs in the wholesale sector would be lost; 166 in business services and 188 positions in miscellaneous services also would be cut.

In a worst-case scenario (50-percent surface water reduction with no augmentation from groundwater) earnings losses in Fresno County would top $137 million annually, with up to 5,400 jobs lost. "Results of the analysis stress the importance of agriculture to Fresno County and surrounding regions," Cothern states. "Even the most moderate water reduction policies result in substantive employment losses, and these losses steadily mount despite the policy considered."

Cothern's study was supported by the California Agricultural Technology Institute (CATI) and CATI's Center for Agricultural Business (CAB).

CAB Director Bert Mason said the research offers valuable information to Fresno County as well as state and federal government leaders. Projections of gross farm income and resultant earnings losses can enable policymakers to prepare for problems such as rising unemployment, reduced sales and property tax revenues, and loss of customer base to private business.

Information on formal publication of research results will be announced in future Update issues. For more information, Cothern may be contacted through the Department of Agricultural Economics at (559) 278-2949.

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